Monday, September 17, 2012

Tax cuts don't spur economic growth


But they do exacerbate income equality. From the non-partisan Congressional Research Service:
Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%. There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.
Trickle down doesn’t work. Tax cuts for “job creators” doesn’t work. If you want to get the economy going, preserve critical safety net programs and reduce the deficit, raise taxes on the rich. Despite all their whining, it won’t hurt them.

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